This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration. Need a new registration confirmation email? Click here
NEW YORK (
TheStreet) -- As the drama over the attempt by
Dell(DELL) to be taken private by a consortium of investors for $24.4 billion mounts, some analysts are bracing for a new leveraged buyout wave that could see high profile companies like
Gap(GPS - Get Report) and
Symantec(SYMC) find their way into private hands.
The last LBO wave crested in 2007 as credit markets began to freeze and overleveraged banks around the world fell into a state of crisis. Bank of America Merrill Lynch analysts now foresee a new wave building as a result of cheap stock valuations, easy money and a revival in some key finance markets.
Such a scenario could put large-cap firms across the retail, technology and industrial space into private hands, as firms such as
Apollo(APO) look to put billions in investor money to work.
According to a screen by a team of Bank of America Merrill Lynch quantitative analysts, retailers as visible as Gap,
Coach(COH - Get Report) and
Ralph Lauren(RL) could be attractive take-out candidates, given their relatively high free cash flows and manageable debt positions.
In the industrial space, names like
Joy Global(JOY) and
Northrop Grumman(NOC) could be buyout targets, while tech specialists Symantec,
Garmin(GRMN - Get Report) could also be taken private, according to the BAML analysts.
The BAML analysts were surprised that presidential elections in the U.S. and fears such as the so-called 'Fiscal Cliff' and the prospect of a double dip recession cooled M&A activity in Corporate America. Still, some key deal markets showed signs of life last year.
"The one exception was LBO activity, which has continued to be substantial," wrote the analysts in a report on Wednesday, highlighting that 66% of private equity deals in 2012 exceeded $1 billion.
"Driven by interest rates near all-time lows, an equity market that is on a multi-year climb, and a structured finance market that has made a resounding comeback, we believe the environment is ripe for a further acceleration in LBO activity as well as other forms of M&A," the analysts concluded.
The analysts also argued small cap stocks could benefit from a buyout revival, echoing
similar analysis by Citigroup analysts.
Express(EXPR), tech firms
Demand Media(DMD) and
Shutterfly(SFLY) are among companies on BAML's small-cap takeover screen.
Other potential targets include foods players
Krispy Kreme(KKD) and
Tootsie Roll Industries(TR), as well as gun manufacturers
Smith & Wesson(SWHC - Get Report) and
Sturm Ruger(RGR), according to the analysts.
"Our argument is based on the fact that balance sheets are in solid shape, capital markets are open and companies are able to get financing," the analysts wrote.
To make the screen, a company had to have a standard deviation for its last 20 quarters of free cash flow less than 0.22, with a free cash flow to enterprise value of more than 4.9%. A firm's net debt to EBITDA had to be less than 0.29, the analysts noted.